B6| Wednesday, October 2, 2019 ** THE WALL STREET JOURNAL.**
Amazon.com Inc.isad-
vancing a plan to open a chain
of U.S. grocery stores with
early outposts in Los Angeles,
Chicago and Philadelphia, ac-
cording to people familiar
with the matter.
In the Los Angeles area, it
has signed more than a dozen
leases, the people said. The
first few stores are likely to be
in the dense suburban loca-
tions of Woodland Hills and
Studio City, while another gro-
cer is slated for the city of Ir-
vine, in nearby Orange County,
a person familiar with the
matter said. These stores
could open as early as the end
of the year.
Amazon is planning to op-
erate dozens of grocery stores
in cities across the country,
part of the online giant’s in-
creasing focus on a bricks-
and-mortar presence to find
more ways to reach consum-
ers.
Many of the proposed loca-
tions are outside urban cores
and cater to middle-income
consumers. Apart from pre-
BYESTHERFUNG
and 18 Amazon Books stores.
Revenue from these bricks-
and-mortar businesses is small
but edging up. In the second
quarter, net sales from Ama-
zon’s physical stores rose 1%
to $4.3 billion from a year ear-
lier, compared with 16%
growth recorded in its online
stores, according to Amazon’s
earnings statement. Sales in
its physical stores includeitems that customers select in
the store, but exclude pur-
chases made online and picked
up at a store.
One of Amazon’s first gro-
cery locations will be on N.
Topanga Canyon Boulevard, at
a strip center in the Woodland
Hills neighborhood of Los An-
geles, the people said.
Local building and safety
departments recently grantedTHE PROPERTY REPORT
pared foods, they will stock
mainstream items such as
soda and Oreos, people famil-
iar with the matter said.
The company now has 16
Amazon Go stores, where cus-
tomers can grab ready-to-eat
food and grocery purchases
checkout-free. It also has four
Amazon 4-star stores, which
stock products rated 4-stars
and above on the Amazon site,contractors hired by Amazon
permits to change the facade,
start electrical work on light
fixtures and fire sprinklers,
and to install an espresso ma-
chine and kitchen equipment
at the property there. Filings
show that there will be a sub-
stantial kitchen, indicating
that the store will offer pre-
pared foods.
The roughly 35,000 square-foot store was previously oc-
cupied by Toys “R” Us, and its
neighbors are Citibank, Office
Depot and Sharky’s Woodfired
Mexican Grill. There is a
Costco wholesale market half
a mile away.
Paragon Commercial Group,
the owner of the strip center,
didn’t respond to requests to
comment.
Amazon doesn’t comment
on rumors or speculation, an
Amazon spokeswoman said.
Amazon is also looking at
grocery spaces in the New
York metropolitan area, New
Jersey and Connecticut. Many
of these locations are in strip
centers and open-air shopping
centers and would occupy
about 20,000 to 40,000 square
feet, the people said.
In March, The Wall Street
Journal reported that Ama-
zon’s new grocery chain isn’t
intended to compete directly
with the company’s upscale
Whole Foods Market chain,
which doesn’t sell products
with artificial flavors, preser-
vatives and sweeteners,
among other quality stan-
dards.
The Journal was unable to
determine what the new
stores would be called or
whether they will use a similar
cashierless technology used by
its chain of convenience
stores, Amazon Go.Amazon Advances Grocery-Store Plan
The e-commerce giant
plans to open a chain
as it increases its
offline presence
Amazon has signed leases in the Los Angeles area, including at this site in Woodland Hills, Calif., people familiar with the matter said.MICHAL CZERWONKA FOR THE WALL STREET JOURNALAs one of the world’s larg-
est hotel data collectors, STR
gathers confidential informa-
tion on such metrics as reve-
nue and occupancy from more
than 66,000 hotels world-wide
in some 180 countries. Compa-
nies including Marriott Inter-
national Inc. and Wyndham
Hotels & Resorts Inc. use STR
data to compare their own
performance—in some cases
daily—with competitors.
The acquisition opens up a
new market for CoStar. It was
founded in 1987 primarily as a
company that amassed andsold data on office buildings.
Over the years, it has ex-
panded into industrial, retail
and rental apartments, partly
through acquisitions, growing
to a market value of more
than $21.5 billion.
“We’re trying to get really
high-quality data for a $3 tril-
lion asset class,” CoStar Chief
Executive Andrew Florance
said in an interview. The fig-
ure referred to his firm’s esti-
mate of the combined market
value of all hotels world-wide.
CoStar shares, which have
been trading near their recordhigh, rose $3.95, or 0.7%, to
$597.15 on Tuesday.
Before Mr. Florance started
CoStar, commercial real-estate
firms directly controlled most
data on such things as leasing,
building occupancy and tenant
rosters. Those firms now rely
heavily—and pay high prices—
to CoStar for that data.
The Federal Trade Commis-
sion imposed in 2012 strict
conditions on the firm’s effort
to acquire LoopNet, another
real-estate data firm.
CoStar had to spin off Loo-
pNet’s Xceligent unit and signa consent decree pledging not
to restrict customers from
providing competitors with
real-estate information.
CoStar executives said they
didn’t think the STR deal
would trigger any antitrust
concerns. The hotel data Co-
Star now collects is limited to
basic property information
and details on property sales.
CoStar is planning to use its
large sales force to expand
STR’s reach geographically.
“There are 350,000 hotels
outside of the U.S. that are
targets that we could be goingafter,” said Amanda Hite,
STR’s chief executive.
CoStar hopes to use STR’s
expertise in providing data for
performance comparisons to
serve investors in office build-
ings, stores and apartments.
Such a move would pit Co-
Star against startup data firm
VTS, whose backers include
big landlords.
Hendersonville, Tenn.-based
STR was founded by Randy
Smith and his late wife, Caro-
lyn J. Smith. Its revenue in
2019 is expected to be about
$64 million, according to STR.CoStar Group Inc., which
has built a multibillion-dollar
business out of selling com-
mercial real-estate data, is
making a push into the lodg-
ing industry with a deal to buy
the hotel data firm STR for
$450 million.
STR began marketing itself
for sale in August, according
to CoStar and STR executives,
and the companies shortly
struck a deal. The all-cash pur-
chase is expected to close late
this year.
BYPETERGRANT
CoStar to Buy Hotel Data Firm STR for $450 Million
With the recent departure
of Chief Executive Adam Neu-
mann and the company’s scut-
tled initial public offering, We
is scrapping its high-growth
strategy and looking to slow
its expansion and cut losses.
That means pulling back on
ventures in China and other
less-profitable overseas mar-
kets, say real-estate executives
and people close to the com-
pany.
The Chinese market has
stumped many ambitious U.S.
startups and even some tech
heavyweights. Ride-hailing
company Uber Technologies
Inc. gave up in 2016 when it
sold its Chinese business to lo-
cal rival Didi Chuxing Technol-
ogy Co. In August Amazon.com
Inc. said it is closing its Chi-
nese domestic e-commerce
business.
“Money is not enough to
succeed in China,” said Omer
Ozden, chief executive of in-
vestment firm RockTree Capi-
tal and a founding investor in
the Beijing-based co-working
company Ucommune.
China was a big part of Mr.
Neumann’s plan to turn his
company into a global “physi-
cal social network,” and the
country looked like a market
ripe for WeWork’s picking.
Co-working arrangements
account for 6% of office space
in Beijing and Shanghai, com-pared with 3.6% in Manhattan
and 4% in San Francisco, said
Sidharth Dhawan, the Asia Pa-
cific head of agile real estate
at brokerage CBRE.
In 2017, WeWork formed a
joint venture with Chinese in-
vestment company Hony Capi-
tal, Japan’s SoftBank Group
Corp. and other investors.
Hony and SoftBank have since
invested or committed to in-
vest $800 million in the ven-
ture, which is 59% owned by
We, according to We’s filing.
In April 2018, when We an-
nounced the acquisition of
Chinese co-working company
Naked Hub, Mr. Neumann said
he hoped to have a million
customers in the country by
2021, up from 80,000 last
year.
From an initial location in
Shanghai in 2016, it has grown
to more than 100 locations in
mainland China, even ventur-
ing into so-called second-tier
cites—such as Xian, Wuhan
and Chengdu—that other in-
ternational investors shy away
from.
Much of Chinese demand
for workspace comes from
startups that tend to be more
sensitive to prices; and We-
Work soon found itself in rate
wars with local operators and
landlords seeking tenants. A
slowing Chinese economy also
makes startup leasing fickle.We Co.’s new management
team is considering reining in
aggressive expansion plans in
China as part of the company’s
new emphasis on controlling
costs, people familiar with the
matter say.
WeWork’s parent company
has moved forcefully to win
business in the country, but
like a number of other U.S.
startups it has struggled to
make money there.
Executives at the New York-
based company said in the
past that a big presence in the
world’s most populous nation
is crucial to its rapid growth
strategy. But the provider of
shared workspace has run into
challenges, including lower-
priced competition and a cool-
ing Chinese economy.
WeWork’s expansion in
China and other foreign mar-
kets has pushed the company
further from profitability. Rev-
enue per customer “has de-
clined as we have expanded
internationally into lower-
priced markets,” We said in a
recent filing.
The China business alone
pushed down the com-
pany’s contribution margin—a
type of profit margin used by
We—by 3 percentage points,
according to the filing.BYKONRADPUTZIER
ANDESTHERFUNGChastened WeWork Weighs
Pullback in Chinese Market
Co-founder Adam Neumann with John Zhao, CEO of investment company Hony Capital.JACKAL PAN/VISUAL CHINA GROUP/GETTY IMAGESAUCTIONSAUCTIONS
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